Play Updates, Saturday, 08/09/2008

In Play Updates and Reviews

by James Brown

Call Updates

Adobe Systems - ADBE - close: 45.15 chg: +1.93 stop: 41.50*new*

ADBE displayed some impressive relative strength on Friday with a strong rally
out of the gate. The stock added more than 4.4% and closed above potential
resistance at the $45.00 mark. Volume was above average on the move, which is a
good sign. Broken resistance near $42.00 should be new support so we're inching
up our stop loss to $41.50. Our target is the $47.50-50.00 zone. If the NASDAQ
can keep its rally alive then ADBE should be in good shape. If not then ADBE
will be a target
for profit taking. The Point & Figure chart is positive with a
$71 target.

Suggested Options:
We are not suggesting new positions at this time but a dip or a bounce near
$42.50 might be a new entry point.

Target exceeded! RIMM out performed the market with a strong 5% gain on Friday.
Volume was just barely above the norm. The rise above resistance in the $129-130
zone is a big positive. Shares hit $133.89 intraday. Our first target was
$129.00. We suggest readers take some money off the table. We're adjusting the
stop loss to $122.50. More conservative traders may want to move their stop
closer to $125, which should be short-term support that is underpinned by the
rising 100-dma. We
are not suggesting new positions at this time but a dip or
bounce near $127-125 might be another entry point. Our secondary target is
$137.00.

Suggested Options:
We are not suggesting new call positions at this time. See the play details
above for a potential entry point.

The VIX is struggling and you'd be tempted to think that with a 300+ move on the
DJIA and a 2.4% rise in the S&P on Friday that the VIX would breakdown under the
20 level. It did not break 20, not even on an intraday basis. The short-term
trend is still lower. If you recall our original play description outlined our
thinking on the VIX. We're moving into the two worst months of the year. The
short covering in the financials was running out of steam. Banks were borrowing
from the
Fed at record levels because they won't lend to each other. Most
everyone believes we are approaching the half-way point in the credit crisis.
The housing market is still struggling. Experts are predicting that the U.S.
government will have to take over FNM and FRE before they go under. The U.S.
consumer is still struggling. The country is losing jobs, although not yet at a
recession level pace. By buying September calls on the VIX we were betting that
the stock market would have another
plunge lower and the VIX would spike to 30
and beyond. The stock market is still in a bear market and it's common to see a
10% bounce in a bear market. The current bounce in stocks has not yet hit 10%.

At this point I would look for two things. Wait to buy calls on the VIX until we
see the S&P 500 back under the 1260 level. Or wait for a very clear, can't be
denied, sort of failed rally/bearish reversal pattern in the major indices. If
you are looking for new positions I'd buy October calls instead of Septembers.
Our exit target is 29.75 on the VIX.

Suggested Options:
If we do see another entry point (see details above) we would buy the October
calls. The 27.50 or 30.00 calls should work.

Put Updates

Bank of Amer. - BAC - cls: 32.25 change: +0.73 stop: 34.15

We added BAC on Thursday night after what appeared to be a failure in BAC's
oversold bounce. The stock had been struggling at significant resistance.
Friday's big bounce in the market definitely throws a stumbling block in our
progress. Yet the financials did not rally to a new relative high like other
sectors in the market. The bounce in banking stocks was impressive but they
still look vulnerable. We're still tempted to buy puts here at current levels
or, considering the market's
big rally on Friday, you can wait for a new decline
under $32.00 or $31.50 to initiate positions. We have two targets. Our first
target is $28.00. Our second target is $25.50.

A disappointing earnings report sent FRE's sister company FNM down 9% on Friday.
Shares of FRE did not react much and closed almost unchanged after a spike to
$5.43. The trend is still lower and investors remain worried that the U.S.
government may have to step in and save FRE and in the process wipe out the
stock holders. Negative comments from industry experts that they don't see FRE
and FNM surviving certainly don't help. We are not suggesting new put positions
at this time but
if you think FRE is going to fall toward $2.50 or lower then
you may want to consider a speculative position. We still consider this a very
high-risk play. The stock has been extremely volatile and we're not using a stop
loss. More conservative traders may want to take some money off the table now.
We consider this a lottery-ticket style of play. The put option is our ticket.
If we win, we should win big. If we lose, we lose it all. Our short-term target
would be a move back to $5.00.
More aggressive traders may want to aim lower.

Suggested Options:
We are not suggesting new positions. However, if you are considering new bearish
strategies we'd look at October puts. We had suggested the October $7.50, $6.00
and $5.00 puts.

The 300-point rally on Friday was unexpected. The broker-dealers out performed
the market with a 4% gain in the XBD index. Shares of LM out did its peers with
a 7.7 gain, which almost completely erased Thursday's losses. We added LM as a
put play on Thursday night because Thursday's drop appeared to be a breakdown
from a bear wedge pattern. The short covering on Friday lifted LM right back to
its recent highs. More conservative traders may want to abandon the position now
or tighten
their stops toward $43.00. This was an aggressive play and we're to
stick to our wide stop at $43.51. Consider waiting for a new decline under
$41.00 or $40.00 before buying puts again. We have two targets. Our first target
is $35.75. Our second target is $32.50.

Suggested Options:
If LM provides a new entry point we would suggest the September $40 or September
$35 puts.

Strangle Updates

(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call
and an OTM put on the same stock. The strategy is neutral. You do not care what
direction the stock moves as long as the move is big enough to make your
investment profitable.)

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Apple Inc. - AAPL - close: 169.55 chg: +5.98 stop: n/a

It was an incredible week for AAPL. The stock traded under $153 on Monday and by
Friday's closing bell shares had rallied 10%. AAPL has rebounded back through
resistance near $164-165 and through technical resistance at its 200-dma. The
next hurdle for the bulls is the two-month trendline of lower highs. We are down
to our last five days before August options expire. Due to our dwindling time
frame we are adjusting our exit target to $4.50-5.00 in an attempt to recoup
some of our capital.
Unfortunately, stocks start to hover around major
psychological support &resistance as we near options expiration so we're not
expecting any big moves this week, which does not bode well for our strangle. We
are not suggesting new strangle positions. The options we suggested were the
August $180 calls (APV-HP) and the August $150 puts (APV-TJ). Our estimated cost
is $8.90.

BPOP has rallied right to resistance near $7.50 and its descending 50-dma. This
could be a really tough level for the bulls to crack. We are adjusting our
suggested exit target to $0.95-1.00, down from $1.45. We need to be more
conservative with just five trading days left for August options. If stocks
continue to rally then BPOP has a good chance of rising to a new relative high.
Once over $7.50 the call will start building intrinsic value. More conservative
traders may want to adjust
their target to $0.50-0.65 in an attempt to recoup
their capital. Just about any significant decline from here will slash our
chances of exiting. We are not suggesting new strangle plays on BPOP. The
options we listed were the August $7.50 calls (BQW-HU) and the August $5.00 puts
(BQW-TA). Our estimated cost was $0.65.

The Dow Jones Industrial Average's rally on Friday pushed the DIA to a new
six-week high and above technical resistance at its 50-dma. Volume was strong
for the DIA. Unfortunately we're down to our last five trading days for August
options. More aggressive traders may want to keep their targets where they are
at. The August $115 call did hit $2.95 on Friday. We are lowering our exit
target to $4.00-4.35 in an attempt to recoup our capital. We're not suggesting
new strangle positions
at this time. The options we suggested were the August
$115 calls (DIA-HK) and the August $109 puts (DIA-TE). Our estimated cost is
$4.35.

Suggested Options:
We are not suggesting new strangles on the DIA.

Picked on July 07 at $112.21
Change since picked: + 4.74
Earnings Date 00/00/00
Average Daily Volume = 15.5 million

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iShares Brazil - EWZ - cls: 74.61 chg: -1.30 stop: n/a

The Brazilian Bovespa index continues to decline and the EWZ sank to a new
relative low on Friday. The August $75 puts are technically in the money but not
by much. A sudden rally from here would slash our chances of success. We only
have a few days left before August options expire so we're lowering our exit
just under breakeven. Our new suggested exit is $3.50-4.00. We're not suggesting
new positions at this time. The options we suggested back in early July were the
August $90 calls
(EWZ-HR) and the August $75 puts (EWZ-TO). Our estimated cost
is $3.95.

The post-earnings bounce in FWLT has already failed. The stock plunged 5% on
Friday and looks poised to retest the $50 zone soon. We have five days left for
August options. We're adjusting our exit to $2.50, just under breakeven, in an
attempt to recoup our cost. We are not suggesting new strangle positions in FWLT
at this time. The options we suggested were the August $70 calls (UFB-HN) and
the August $50 puts (UFB-TJ). Our estimated cost was $2.60.

The back and forth in shares of GLW will make you seasick. The stock hasn't gone
anywhere for about five weeks. Now that we're nearing options expiration we
definitely don't expect GLW to break out of its trading range. If by some slim
chance that GLW does rally or plunge enough to push our options in the money we
would exit. Our new targets to exit are $0.40 in an attempt to recoup some
capital. We are not suggesting new strangle positions. The options we suggested
were the August
$22.50 calls (GLW-HX) and the August $17.50 puts (GLW-TW). Our
estimated cost is $0.75.

When GOOG reported earnings last month the results disappointed investor
expectations and the stock plunged to one of its biggest one-day losses in
history. Yet the drop was not enough to hit our profit target. The play did turn
profitable a few times (July 22nd, Aug. 1st, and Aug. 4th) but we were looking
for a bigger reward. Now after last week's big bounce we are looking at a
potential loss. GOOG has rallied back toward resistance near $500. With only
five days left on August options
odds are not good for our strangle's success.
We are lowering our exit target to $10 in an attempt to recoup some of our
capital. We're not suggesting new strangle positions in GOOG at this time. The
options we listed were the August $590 calls (GOO-HR) and the August $480 puts
(GOP-TI). Our estimated cost was $19.10.

Suggested Options:
We are not suggesting new strangles on GOOG.

Picked on July 16 at $535.60
Change since picked: -40.59
Earnings Date 07/17/08 (confirmed)
Average Daily Volume = 4.5 million

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Internet Holders - HHH - cls: 51.28 change: +1.50 stop: n/a

The market's rally on Friday lifted the HHH to a 3% gain but our strangle
remains terminally ill. We are not suggesting new positions at this time. The
options we suggested were the August $55 calls (HHH-HK) and the August $45 puts
(HHH-TI). Our estimated cost is $1.65. Note: We're adjusting our exit target to
$0.75-0.80.

Suggested Options:
We are not suggesting new strangle plays on the HHH.

LEH's short-term bullish trend of higher lows is being tested again. A breakdown
from here could herald a new leg lower. We have six weeks left before September
options expire and need to see LEH significantly above $24.00 or under $10.00.
We're not suggesting new positions at this time. The options we suggested were
the September $24.00 calls (LYH-IR) and the September $10.00 puts (LYH-UB). Our
estimated cost is $2.15. We want to sell if either option hits $3.50 or higher.

Last Thursday LM appeared to breakdown from its consolidation pattern but
Friday's rally pushed it right back to its recent highs. We only have five
trading days left for August options so we are adjusting our exit price to $2.00
in an attempt to recoup some capital. We are not suggesting new strangles at
this time. The options we listed were the August $45 calls (LM-HW) and the
August $35 puts (LM-TG). Our estimated cost was $3.15.

The MOO has fallen to round-number support at $50. A bounce from here will crush
our odds of exiting this play with any money. We only have five days left on
August options so we're adjusting our exit price to $2.00. More aggressive
trades may want to risk it and keep their target higher. We're not suggesting
new positions at this time. The options we suggested were the August $62 calls (MYV-HJ)
and the August $50 puts (MOO-TX). Our estimated cost is $2.10.

NFLX rallied to a new relative high and tagged technical resistance at its
100-dma directly overhead. The short-term trend is up but it looks like NFLX
wants to dip and retest $30 again before moving. We don't have much time left so
we're adjusting our exit price to $1.00. We're not suggesting new strangles at
this time. The options we suggested were the August $32.50 calls (QNQ-HT) and
the August $22.50 puts (QNQ-TX). Our estimated cost is $1.20.

Wow! The NDX delivered a strong weekly performance and the Qs broke through
resistance at the top of its trading range, and through resistance at several
moving averages including the simple 200-dma. The August $47 calls are just
barely in the money and any sort of correction is going to crush our chances to
exit with any capital. We are adjusting our exit price to $1.50-1.80. We are not
suggesting new strangles and more conservative traders will want to consider
closing this play.
The options we suggested were the August $47 calls (QQQ-HU)
and the August $43 puts (QQQ-TQ). Our estimated cost is $1.80.

Currently the August $14 call is trading around $1.20. More conservative traders
will want to consider an early exit right here to minimize their losses. If SBUX
can continue to rally then great, we have a chance to score a profit. If SBUX
reverses lower that call option is going to crumble to nothing very easily. We
are adjusting our exit price to $1.90 instead of $2.10. We are not suggesting
new strangles. The options we suggested for the strangle were the August $14.00
calls (SQX-HK)
and the August $13.00 puts (SQX-TJ). Our estimated cost was
$1.38.

UBS was caught in the Auction Rate Securities (ARS) fiasco. This past week
Citigroup and Merrill Lynch announced they would buy back billions in ARS that
they had sold to individual investors under the impression they were extremely
liquid and almost as good as cash. Unfortunately, when the credit crisis began
to worsen the ARS market froze (see tonight's wrap for more details). On Friday
UBS announced they would buy back almost $19 billion in ARS and the stock
actually rallied on
the news. Shares hit $21.51 before struggling with its
simple 50-dma. We don't have much time left. August options expire in five days.
We're adjusting our exit targets in an attempt to recoup our cost.

Picked on July 13 at $19.49
Change since picked: + 1.66
Earnings Date 08/12/08 (unconfirmed)
Average Daily Volume: 7.3 million

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Valero Energy - VLO - close: 34.72 chg: +1.78 stop: n/a

The oil refiner stock have been cursed. Investors sold them as oil climbed
higher and investors refused to buy them as old sold off. VLO has been trying to
form a bottom for the last four weeks and still has a bearish trend of lower
highs. We had suggested an early exit as soon as VLO failed to see any big
post-earnings move. Now we're down to our last five trading days. We're
adjusting our suggested exit price to $0.80. We are not suggesting new strangle
positions. The options we
suggested were the August $37.50 calls (VLO-HU) and
the August $27.50 puts (VLO-TS). Our estimated cost is $1.38.

The trend in WM is down but it looks like we're going to run out of time before
the stock challenges the July lows. August options expire soon so we're
adjusting our suggested exit price to $0.40 in an attempt to recoup some
capital. We are not suggesting new positions at this time. The options we
suggested were the August $8.00 calls (WM-HV) and the August $4.00 puts (WM-TH).
Our estimated cost is $0.72.

Dropped Calls

None

Dropped Puts

VISA Inc. - V - close: 72.60 change: +3.10 stop: 72.55

The sharp market rally on Friday fueled some short covering in V and the stock
surged more than 4.4%. Shares hit our stop loss at $72.55 closing the play. The
overall trend remains negative and we would keep V on your watch list for
another bearish entry point until it breaks out over the 50-dma.